Shares fell sharply on Friday after a blowout jobs report fueled bets of a rate hike by the U.S. Federal Reserve and as investors turned defensive ahead of the weekend, wary of the flare-up in Middle East hostilities.
On Wall Street, all three indexes were lower, led by a selloff in technology shares, including AI chipmaker Nvidia. Shares in Broadcom were down nearly 7%, continuing losses since the semiconductor company reported underwhelming results on Wednesday. The Dow Jones Industrial Average fell 1%, the S&P 500 lost 2.4% and the Nasdaq Composite dipped 4%.
Data showed U.S. employers added far more jobs than expected in May, bolstering bets that the Fed could raise rates late this year. U.S. Treasury yields surged following the report, with the yield on the 2-year note, which typically moves in step with Fed rate expectations, hitting a 15-month high. It was last at 4.164%.
“We're talking about a strong economy. That just adds to inflation risk coming from the Gulf. It makes it difficult for the Fed to even think about rate cuts and might even increase the chances — although we're still not forecasting that yet — of a rate hike by the Fed before the end of the year against the backdrop of inflation.”
Gary Schlossberg, market strategist at Wells Fargo Investment Institute
The pan-European STOXX 600 index eased 0.29%. MSCI's gauge of stocks across the globe fell 2.23%. Oil prices slipped after Oman said operations at Mina al Fahal port were proceeding normally following a Reuters report that oil loadings had been suspended after an explosion. Brent crude futures fell 2% to settle at $93.09 a barrel and U.S. crude dipped 2.69% to $90.54 per barrel, with both contracts set to post their first weekly gains in three weeks.
In currencies, the yen settled around the 160 per dollar level and was last down 0.09% at 160.12, as Japanese officials ramped up warnings about the ailing currency. The euro was down 0.74% at $1.1523. Sterling weakened 0.64% to $1.3334. The dollar index was on track to gain 0.62%, supported by the Middle East conflict.
“There are some near-term pressures on the short end of the curve and it's largely because of the geopolitical impact on the price of oil and headline inflation but looking through that, we also understand that these pressures tend to be temporary and calm back down.”
Talley Leger, chief market strategist at the Wealth Consulting Group
Cryptocurrencies extended recent declines, with bitcoin shedding 6.04% to $59,746.51 and heading for a weekly decline of nearly 18%, its biggest since the week FTX collapsed in November 2022, while ether declined 12.02% to $1,559.57.
Background
The U.S. Federal Reserve has been closely monitoring economic indicators such as employment data to guide its monetary policy decisions. The recent surge in job creation adds complexity to the Fed's strategy, especially amid ongoing inflationary pressures and geopolitical tensions.
Investors will be closely watching the Federal Reserve's next moves, as the strong jobs data adds pressure for potential rate hikes. The ongoing geopolitical tensions in the Middle East and their impact on oil prices remain a key concern for global markets.
